Mis-Underestimating the Cost of Health Care "Reform"

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medicare costs

Yesterday, the House of Representatives introduced its health care "reform" legislation that is supposed to cost just a $1 trillion over the next 10 years, according to the most recent Congressional Budget Office (CBO) estimate. The Obama administration and the Democratic leadership in Congress have promised to pass health care "reform" legislation only if it is completely paid for. To achieve this, the House Democrats plan to soak the rich with a surtax on incomes over $350,000 per year ($500 billion) and by imposing even lower Medicare reimbursement rates on hospitals and doctors. Of course, these new taxes and rationing schemes will only "pay for" health care "reform" if the CBO estimates are right.

Unfortunately, as the Cato Institute's Michael Tanner and Chris Edwards point out, the CBO and other agencies have a history of wildly underestimating future government medical program expenditures:

A further concern is that initial cost estimates of federal health programs are usually very optimistic. When Medicare was launched in 1965, Part A was projected to cost $9 billion by 1990, but ended up costing $67 billion. When Medicaid's special hospitals subsidy was added in 1987, it was supposed to cost $100 million annually, but it already cost $11 billion by 1992. When Medicare's home care benefit was added in 1988, it was projected to cost $4 billion in 1993, but ended up costing $10 billion. Or consider that when Massachusetts Commonwealth Care was put into place in 2006, it was expected to cost about $725 million annually, but the expected cost for 2009 is now almost $1 billion.

To say the least, past cost estimates that are off by more than 500 percent do not inspire confidence in the accuracy of the new estimates. 

NEXT: Health Care Reform Can Be Fully Funded by Euphemisms

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  1. You’re not hoping hard enough Ron.

  2. It’s sort of like watching gorillas in the wild. Simply by your presence, you are altering their behavior.

    Same thing happens in health care, or anything else for that matter. You can’t use today’s numbers to figure out how the market will react in the future. As soon as you make health care “more accessible”, you drive up the demand. Which in turn, drives up the costs. Which in turn, leads people to ask for more government control.

    It’s an endless cycle that was caused by the government in the first place. More government will never fix it.

  3. To achieve this, the House Democrats plan to soak the rich with a surtax on incomes over $350,000 per year ($500 billion)

    The details are actually a surtax on joint incomes above $350k, but on individual filers at $280k. Presumably this will decrease the number of joint filers.

  4. I’ve stopped worrying about slowing this train down. Now i figure that, the sooner the whole thing goes off a cliff, the sooner we can reroute the track.

  5. and by imposing even lower Medicare reimbursement rates on hospitals and doctors.

    These people are truly insane. Doctors are already dropping Medicare patients left and right.

    “Who cares if there aren’t any doctors willing to see you?! You have universal healthcare, you ungrateful bastard!”

  6. Or they could just seize control of all medical facilities, draft all the personnel, and get the cost of the program down to zero.
    What a country!

  7. Unfortunately, X, ammo prices are still up.

  8. The details are actually a surtax on joint incomes above $350k, but on individual filers at $280k. Presumably this will decrease the number of joint filers.

    The article doesn’t say, but I can guarrantee that the surtax will kick in at 175k for married filing individually. I think the filing individually in the story actually means filing single. Oh well, yet another reason not to get married.

  9. “Unfortunately, X, ammo prices are still up.”

    And trying to find quality ammo in popular calibers is damn near impossible.

  10. Jordan – once care is universal there is an easy fix to that problem: The Congress mandates that doctors can’t turn away people with federal health-care coverage.

    I’m with Xeones.

  11. The article doesn’t say, but I can guarrantee that the surtax will kick in at 175k for married filing individually.

    So, if you’re married filing separately, the spouse making less than 175K can still avoid the tax.

    And, of course, where this tax will really start to bite is when “bracket creep” sets in due to inflation, and people making far less than $350K when the tax was passed get hit with the surtax on their inflated salary dollars.

  12. Unfortunately, X, ammo prices are still up.

    What, you people haven’t been hoarding and/or practicing your longbow skills? For shame.

  13. And trying to find quality ammo in popular calibers is damn near impossible.

    Cheaper Than Dirt has a lot of “Out of Stock” notices up, but they still have stuff that I can’t find anywhere else. Got some Hornady .308 there last week that I couldn’t find anywhere else.

  14. I’ve said it before, but it’s worth saying again: Reason, put this data into a nice little video. You could kill Obamacare with a 30 second ad.

  15. What, you people haven’t been hoarding and/or practicing your longbow skills? For shame.

    I’ve got a couple of places in mind for pit traps, if that helps.

    Unless I get into a prolonged firefight with my neighbors (and win), I don’t think I’ll be running out of ammo in my lifetime.

  16. Reason, put this data into a nice little video

    …and post in on YouTube or you’ll never be taken seriously! Right, LonePapaya?

    (Sorry dude. The drugs made me do it.)

  17. Jimmy Carter’s sweaters; Barry O’Bama’s jeans; perhaps it’s an omen.

  18. So, this surtax is supposed to raise over $50 billion per year, by only taxing households making over $350K (yeah, yeah, single threshhold is lower, etc.) Are there really that many people out there making this kind of coin? To get $50 billion, at 10K per household, that takes 5 million households. The “estimates” are that most will only pay a couple thousand extra. Are there really that many people out there making that much money?

  19. For all those that said to themselves, nothing can be worse than Bush & the Republicans and then pulled the Democratic Party lever:

    You BASTARDS!

    There most certainly can be something worse than Bush! Fucking morons that “punished” Bush by voting for Obama when Bush wasn’t even running.

  20. Are there really that many people out there making that much money?

    At least two possible answers:

    1. The congress critters/critter’s staff think that because everyone they know in Manhattan, Georgetown and Santa Monica make this kind of coin, that there are plenty of families that do.

    2. They are a bunch of cynical lying fucks that know damn well that there isn’t enough dough in the >$350k households, but they are just slipping the thin edge of the wedge in.

    I vote for answer #2.

  21. They are a bunch of cynical lying fucks that know damn well that there isn’t enough dough in the >$350k households, but they are just slipping the thin edge of the wedge in.

    They’ll probably use the whole joint vs. single filing thing as the wedge-maybe by claiming that married “rich” couples filing separately “cheat the system” or something like that. We may see proposals to require married couples with combined income over a certain amount to file jointly.

  22. “Unless I get into a prolonged firefight with my neighbors (and win), I don’t think I’ll be running out of ammo in my lifetime.”

    Never forget — Mormons have huge caches of food, water and ammo in their homes in anticipation on something or other. When the revolution comes, first take out the Mormons.

  23. Never forget — Mormons have huge caches of food, water and ammo in their homes in anticipation on something or other. When the revolution comes, first take out the Mormons.

    Great. There’s a huge ranch down the road from me chock full of fundamentalist Mormons.

  24. Man…

    I wrote an article like 2 months ago that I never finished and didn’t bother to attempt to get published that was basically a long-form version of what Xeones said.

    Sometimes I just wanna say… Fuck it. Bring it on!

    And while we’re on that topic, no more of this half-assed bullshit. If Obama wants to nationalize banks – do it for real. None of this weak fascism… just do it already. Enslave doctors? Why the fuck not… bring it on. Let the planners have full range to plan, let’s bypass this step on the Road to Serfdom where they can pretend they just didn’t have enough support or power. Give them unlimited power… watch them fuck it up so hard, then watch as the world burns in fiery revolution.

    It’d be like ripping off a bandaid.

  25. Yesterday, the House of Representatives introduced its health care “reform” legislation that is supposed to cost just a $1 trillion over the next 10 years, according to the most recent Congressional Budget Office (CBO) estimate.

    Although this is misleading, since the program takes several years to ramp up. It’s $1T over ten years, but it’s also basically $1T over the last seven years of those ten. Hypothetically the Medicare cuts might take a while to ramp up too, if you believe that they’ll happen.

    The top surtax rate will be 5.4%. Combine that with letting the Bush tax cuts on the higher brackets expire, and we’ll already be at a 44% top rate. We’ll achieve that without decreasing the deficit; indeed, the net effect of all these policies will still be to increase the deficit to record levels making Bush deficits look tiny.

    To close the deficits in the 2013-2019 to even the average GWB deficit by only raising taxes on those making over $250K would require top federal tax rates exceeding 100%. I don’t expect that that would happen (nor that it would work, as the Laffer Curve certainly would come into play at that point), so the middle class is definitely going to get hit.

  26. Has anyone else noticed that these taxes always seem to kick just above what congress makes as a salary? Coincidence?

  27. 44% at the federal level only… meaning around 55-60% including state & occasionally, city income tax.

    Add to that the amount of our life-hours spent working to pay off government in the form of value added taxes, vehicle taxes, corporate taxes, capital gains taxes, etc. etc. etc. and you’re looking at let’s charitably say 70% of your earnings going to the mafia racket… ponzi scheme… dictatorial thugs… I mean… the State.

    We’re well past the negative side of the Laffer Curve already btw – if we weren’t then Obama wouldn’t need to “crack down” on foreign holdings as tax “evasion”.

  28. We’re well past the negative side of the Laffer Curve already btw – if we weren’t then Obama wouldn’t need to “crack down” on foreign holdings as tax “evasion”.

    The Laffer Curve kicks in at different rates for different taxes. It’s easy to move capital, so taxes on capital start having a negative effect sooner. (For the same reason, taxes on capital and corporations tend to be paid by labor.) Taxes on labor tend to be harder to evade, because people have trouble moving.

    US corporation tax, one of the highest in the world, combined with our attempts to tax US companies at the US rate for foreign operations, does cause problems and has Laffer Curve type effects.

    The range for income tax is a bit different, but at a 44% federal and over 50% combined marginal in 39 states, I think we would see some effects.

    But remember, these aren’t the tax increases to reduce the deficit. These are tax increases that will still result in a deficit $500 million larger than GWB’s average deficit in the years 2013-2019.

  29. Agreed John – and that makes it all the more disturbing I think… Since it’s pretty clear that deficits and debt will only mean higher taxes in the future, and since they’re at really the limit of what they can squeeze already, I think the end result is just going to be a lot more people just packing up and leaving or retiring from the productive world.

    I am expecting to see a lot of people taking the Jim Rogers approach. If I had the money, I know I would leave.

  30. Sean W. Malone, I would then expect the foriegn visa and emmigration tax on the wealthy to kick in.

  31. They’ve already done that brotherben.

    For your enjoyment, I provide:

    H.R. 3056

    (Sec. 5) Sets forth additional rules for the tax treatment of high-income individuals who relinquish U.S. citizenship or residency to avoid U.S. taxation (expatriates). Treats all property of expatriates as sold for its fair market value on the day before the expatriation date and includes gain (over $600,000) or loss from such sale in the gross income of such expatriates. Allows expatriates to elect to defer payment of any tax resulting from expatriation if adequate security for payment of such tax is given.
    Requires 30% withholding of tax for certain items of deferred compensation payable to expatriates.
    Imposes a separate tax on gifts and bequests from expatriates exceeding $10,000, payable by the recipient of such gift or bequest.”

  32. Holy Shit Batman!

  33. The government really reallllly doesn’t like people leaving.

  34. that’s one of probably hundreds of such taxes, by the way.

  35. I would like to kknow the comparative costs of doing nothing for the next 20 years. Seems everyone is taking the do nothing because it costs too much attitude. Why isn’t anyone addressing futile care? End of life is where most $ are spent. We in america feel we are entitled to have”everything done”. Much like having our 3 bedrm homes in the suburbs with our SUV’s. Billions are wasted on futile care…I should know..as an ICU RN I see it everyday. You will have to die to get in…there are no beds much of the time. If you arrest …there will be no bed for you to go to. And the problem is only getting worse. ER’s now have corridors with rm #’s. Americans are going to have to wake up to our real problems.

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